2018 RETAIL ASIA-PACIFIC TOP 500
OVERVIEW the Internet via their phones.
Improvements in logistics and payment services will strengthen the expansion of e-commerce to rural areas in Thailand, with consumers eager to access new brands and products that are not available in their villages. Cross-border e-commerce will also gain prominence for the same reason, besides consumers wanting to access more competitively-priced products, such as from China. While Internet retailing will continue to grow, most consumers still prefer to see and feel products in stores before purchasing. This in turn will sustain the performance of store-based retailing in the forecast period. That said, investments to rejuvenate stores, be it for store décor, the launch of new shopping concepts or to bring in new brands and products, will be key for store-based retailers to succeed in the forecast period.
— Jocelyn Cheung, Senior Analyst
THE PHILIPPINES
2017 was a good year for retailing in the Philippines The sustained strong economy in the Philippines led to an increase in consumer spending, which was felt across all retail channels. 2017 was a good year for retailing in the Philippines, as the majority of key players increased their outlets and sales, brands emerged to provide more options for Filipinos, and companies continued to improve the shopping experience, with a special focus on convenience. Retailers also benefited from more frequent shopper visits, the continued growth in the basket size and the increasing preference for premium and discretionary items.
The improving economy specifically increased the incomes of the middle-classes( who can now afford more products and services), workers( particularly those in Business Process Outsourcing), families receiving remittances from overseas Filipino workers, and the younger population, who are ready to explore new options in retailing. The next huge growth will come from the millions of new workers. Some five million new jobs were created over the last five years, and there were more Philippinebased millionaires and billionaires created in the last decade than over the last 50 years. As retiring expatriates return to the Philippines, this list of millionaires will triple, seemingly overnight.
A move into underserved markets Retailing is definitely growing, but is still far from saturated in the Philippines. There remain huge and potentially lucrative untapped opportunities across the industry. Despite aggressive expansion, modern grocery retailers are still only present in around 30 % of the Philippine market. This remains one of the lowest figures in Asia, and presents an opportunity for retail companies to expand, especially to locations outside of Metro Manila. The common trend among the country’ s largest retailers is now to expand outside this area to tap into the underserved markets in the provinces. In 2016, 80 % of SM Retail’ s store openings were outside Metro Manila. 7-Eleven, the country’ s largest convenience store chain, is also aiming to penetrate new territories outside Metro Manila. It is set to open 124 stores in Luzon outside Metro Manila, and 150 branches in Visayas and Mindanao. Even newcomer Alfamart started its business operations in towns south of Metro Manila, as the city is already too crowded. Another key player, Robinsons, also reported new store openings located outside this area. These companies are aware that these regions are exhibiting increasing purchasing power and spending.
Convenience stores continue to increase in popularity Grocery retailers, particularly smaller formats such as convenience stores, continue to drive overall growth in retailing. This trend is driven by the increased demand from consumers who want more convenience in their grocery shopping. The shift towards urban lifestyles also calls for more convenience stores in every town and city across the Philippines, as well as in every business district, especially those with high demand for 24-hour service. To address this increasing demand, a number of new players started entering convenience stores in the Philippines. The only significant players were 7-Eleven and Ministop until 2013.
Now new brands are entering the market, usually global brands brought in by local partners, such as Rustan Group’ s Family Mart, Puregold Price Club’ s Lawson and SM Retail’ s Alfamart. Alfamart has high potential to change the competitive landscape in convenience stores, as it is more than just a convenience store. It is considered as a minimart, which is a hybrid of a supermarket and a convenience store. It adopts the pricing strategy and product assortment of supermarkets, while it follows the store size and presence of convenience stores. Unlike a traditional convenience store, it also offers basic goods, fresh meat, poultry and vegetables packed in smaller sizes. Given these differences, Alfamart is introducing something new to the market, and other convenience stores players should answer this call.
The development of e-commerce The Department of Trade and Industry launched the Philippine E-commerce Roadmap 2016-2020, with the main goal of boosting e-commerce in the country, aiming for it to contribute 25 % of the country’ s GDP. Most retail companies also recognise that everything is moving online, and they have started testing their own e-commerce platforms. Some have set up e-commerce functions on their existing websites, such as: SM Department Store and SM Appliance; the majority of direct selling companies, including Avon and Amway; Mercury Drug; and a few grocery retailers, such as Waltermart Supermarket. Other companies have chosen to partner with established e-commerce websites such as Lazada and Zalora, including Robinsons Retail Holdings.
Internet retailing has varied efficacy according to the channel. There are specific niches in retailing in which e-commerce performs well, and there are some channels in which e-commerce remains irrelevant. Internet retailing in general still needs to overcome a number of challenges and barriers, such as creating an efficient logistics system, the unbanked population, and building trust among shoppers, before it can fully penetrate the market.
Positive prospects for retailing Retailing in the Philippines continues to grow, seeing higher current value growth in 2017 than in 2016, and this presents opportunities for retailers to continue expanding. The positive economic performance in the Philippines is not exhibiting any immediate signs of waning, which ensures that the demand for more retail supply will be sustained. However, there are some impending changes which could greatly affect the competitive landscape once they take effect. Tax reform, for example, will
54 Retail Asia June / July 2018